Air fares set to soar after ash crisis

27 April 2010

Airlines are likely to add more than $50 to the price of transatlantic tickets in a bid to recoup losses from the volcanic ash crisis.

According to the Centre for Economics and Business Research, fares could rise by up to 5.2 per cent. This would add £31 to an economy flight to New York on British Airways, taking it to £545, and £12 to the cost of a flight to Italy, taking it up to £239.

The leading think tank also predicts that fares could rise by a further 2.9 per cent in 2011, and another 3.4 per cent in 2012, pushing the average cost of a London to New York economy class ticket up by £62 over the next three years.

The economic forecasting house estimated that the cost to airline industry of the closure of northern European airspace was around £1.3 billion by the end of last week.

Global airlines have lost about $1.7bn of revenue as a result of the disruptions caused by the Icelandic volcanic eruption, according to International Air Transport Association (IATA) said that at its height, with almost a third of global flights affected.

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Soaring oil prices – which are 75 per cent higher in the first quarter of 2010 compared to the same period on 2009 – are also putting the airlines under intense pressure to recoup losses. This could lead to them applying the European Union for aid, and the weaker players filing for bankruptcy.

The Centre for Economics and Business Research produced the study for shopping website Kelkoo. Bruce Fair, the managing director of Kelkoo in Britain, said: “Most airlines were already struggling prior to the crisis, but this, combined with soaring oil prices, will have a knock-on effect on consumers as carriers are forced to pass on rising operational costs to passengers.”

A separate survey by hotel price comparison site trivago.co.uk showed that overnight accommodation prices rose sharply during the ash cloud crisis, as hoteliers profited from stranded travellers forced to stay longer than expected.

The average price of a hotel night stay in London during the week starting on April 15 was £205 a night compared with an expected average of £138. This equated to a 49 per cent rise on the expected price. Rooms in Madrid were 46 per cent higher, Paris rose 27 per cent and Amsterdam increased 26 per cent.